1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Vlad1618 [11]
2 years ago
5

Data for Hugh’s Corporation is provided below. Hugh’s recently acquired some risky assets that caused its beta to increase by 30

%. What is the stock's new expected rate of return according to the CAPM? Initial beta 1.00 Initial expected return (rs) 10.20% Market risk premium, E(Rm – Rrf) 6.00% Percentage increase in beta 30.00% Increase in inflation premium 2.00%
Business
1 answer:
I am Lyosha [343]2 years ago
3 0

Answer:

The stock's new expected rate of return is 14%

Explanation:

Ke=Rf+beta(Mrp-Rf)

Ke is the cost of capital is 10.20%

Rf i the risk free rate which is unknown

beta is 1.00

(Mrp-Rf) is the market risk premium at 6%

10.20%=Rf+1.0(6%)

10.20%=Rf+6.0%

Rf=10.20-6.00%

Rf=4.20%

Beta for the risky asset is 1.00*130%=1.3

New risk rate is the old rate plus inflation rate of 2.00%

new risk free=4.2%+2%=6.2%

The expected return on the new asset is computed thus:

Ke=6.2%+1.3(6%)

Ke=6.2%+7.8%

Ke=14%

You might be interested in
When U.S. goods become more expensive relative to foreign goods, exports will __________ and imports will __________.
ipn [44]

Answer:

fall, rise

Explanation:

US goods will become less expensive

3 0
3 years ago
What is the difference between ordinal utility and cardinal​ utility? Ordinal utility refers to A. satisfaction when consumers a
adoni [48]

Answer:

I strongly believe that the correct answer is B. Im going to give an example. if we take into account a company like Honda produces 4000 units, for example Mercedes Benz produces 7000 units, this is very important for welfare economics which tries to put values on consumption.

Explanation:

5 0
3 years ago
Most people would rather give up their tvs or the internet than their mobile phones.
12345 [234]

ANSWER – TRUE

 

Most people would rather do away with their TVs or the Internet than their mobile phones. <span>While for a fact, television remains the most used media, and the internet is fast catching up, surveys have shown that most people would still prefer to hold on to their mobile phones above these two.</span>

5 0
2 years ago
What does the word speculation mean to an economist? investing in low-risk stocks with surplus money investing in a type of stoc
Eddi Din [679]
The correct answer among the choices given is the third option. Speculation would mean to an economist as making high-risk investments with borrowed money. It is the purchase of something hoping for it to be more valuable at a certain time.
3 0
2 years ago
Read 2 more answers
A loss is when
Illusion [34]

The answer is B revenue is less than expenses

5 0
3 years ago
Read 2 more answers
Other questions:
  • How does monitor and evaluation of quality processes positively impact on businesses
    7·1 answer
  • Why is looking at cash flow an important step in a good financial plan?
    11·1 answer
  • The strength of the u.s. dollar relative to other currencies depends mainly on:
    5·1 answer
  • Doogan Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct m
    11·1 answer
  • Suppose you invest semiannually for 25 years in an annuity that pays 5% interest, compounded semiannually. At the end of the 25
    10·1 answer
  • Stock market is a market for.?​
    14·2 answers
  • For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model is 350 units, and the total annual inve
    11·1 answer
  • CompuTop Company sells toy laptop computers for $30 each. If the variable cost for each laptop is $20 and fixed costs total $25,
    8·1 answer
  • What does economic problem mean?
    7·1 answer
  • In 25 years, a bond with a 4.75% annual interest rate earned $2,375 as interest. What was the principal amount of the bond if th
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!